a) "Gross
receipts" means the "selling price" or "amount of sale". "Selling
price" or the "amount of sale" means the consideration for a sale valued in
money, whether received in money or otherwise, including cash, credits,
property other than as hereinafter provided, and services, but, prior to
January 1, 2020 and beginning again on January 1, 2022, not including the value
of or credit given for traded-in tangible personal property when
the item that is traded-in is of like kind and character as that which
is being sold; beginning January 1, 2020 and until January 1, 2022, "selling
price" includes the portion of the value of, or credit given for, traded-in
motor vehicles of the first division, as defined in Section 1-146 of the
Illinois Vehicle Code, of like kind and character as that which is being sold
that exceeds $10,000. "Selling price" shall be determined without any deduction
on account of the cost of the property sold, the cost of materials used, labor
or service cost or any other expense whatsoever. "Selling price" does not
include charges that are added to prices by sellers on account of the seller's
tax liability under the Retailers' Occupation Tax Act, or on account of the
seller's duty to collect, from the purchaser, the tax that is imposed by the
Use Tax Act, or, except as otherwise provided with respect to any cigarette tax
imposed by a home rule unit, on account of the seller's tax liability under any
local occupation tax administered by the Department, or, except as otherwise
provided with respect to any cigarette tax imposed by a home rule unit, on
account of the seller's duty to collect, from the purchasers, the tax that is
imposed under any local use tax administered by the Department.
[35 ILCS
120/1 ] Local occupation and use taxes administered by
the Department include, but are not limited to, the Home Rule Municipal
Retailers' Occupation Tax Act [65 ILCS 5/8-11 -1], the Non-Home Rule Municipal
Retailers' Occupation Tax Act [65 ILCS 5/8-11 -1.3], the Home Rule County
Retailers' Occupation Tax Act [55 ILCS 5/5-1006 ], Section 4 of
the Water Commission Act of 1985 [70 ILCS 3720/4 ], Section 5.01
of the Local Mass Transit District Act [70 ILCS
3610/5.01 ]. Section 4.03 of the Regional
Transportation Authority Act [70 ILCS 3615/4.03 ], the Special
County Retailers' Occupation Tax for Public Safety, Public Facilities, Mental
Health, Substance Abuse, or Transportation Law [55 ILCS
5/5-1006.5(a)], the County School Facility and
Resources Occupation Tax Law [55 ILCS 5/5-1006.7(a)], the
County Cannabis Retailers' Occupation Tax Law [55 ILCS
5/5-1006.8], the Municipal Cannabis Retailers'
Occupation Tax Law [65 ILCS 5/8-11 -23], the County Motor Fuel Tax Law
[55 ILCS
5/5-1035.1], and the Municipal Motor Fuel Tax Law [65
ILCS 5/8-11 -2.3].
b) The phrase
"like kind and character" includes, but is not limited to, the trading of any
kind of motor vehicle on the purchase of any kind of motor vehicle, or the
trading of any kind of farm implement on the purchase of any kind of farm
implement, while not including a kind of item which, if sold at retail by that
retailer, would be exempt from Retailers' Occupation Tax and Use Tax as an
isolated or occasional sale.
c) A
motor vehicle traded to a farm implement dealer for a farm implement would not
qualify for the exemption unless such farm implement dealer is also a motor
vehicle dealer because the farm implement dealer's sale of the motor vehicle
would be exempt as an isolated or occasional sale. A farm implement traded to a
motor vehicle dealer for a motor vehicle would not qualify for the exemption
unless such dealer is also a farm implement dealer because the motor vehicle
dealer's sale of the farm implement would be an exempt isolated or occasional
sale. A farm implement traded for a motor vehicle, or a motor vehicle traded
for a farm implement, would qualify for the exemption if the seller is engaged
in business both as a motor vehicle dealer and a farm implement dealer.
Agricultural produce or animals traded for a motor vehicle or for a farm
implement would not qualify for the exemption.
d) The real test is whether the retail sale
of the traded-in tangible personal property by the person who accepts it in
trade would be subject to Retailers' Occupation Tax, or whether such sale would
be exempt as an isolated or occasional sale (see Section
130.110). In the former event,
the tangible personal property qualifies for the trade-in exemption. In the
latter event, it does not.
e) The
value of tangible personal property taken by a seller in trade as all or a part
of the consideration for a sale, where the item that is traded-in is of like
kind and character as that which is being sold, shall not be considered to be
"gross receipts" subject to the Retailers' Occupation Tax and need not be
included in the seller's return, or may be deducted in the return from gross
receipts if included in gross receipts as reported in the return. The value of
traded-in real estate or intangible personal property is not deductible from
gross receipts in computing Retailers' Occupation Tax liability.
f) The Retailers' Occupation Tax applies to
the business of selling tangible personal property at retail in this State
whether such property is new or used and regardless of how the seller may have
acquired such property (i.e., by way of purchase, as a trade-in or in some
other manner).
g) No trade-in
credit may be taken for amounts representing the proceeds due or paid under an
insurance contract if title to missing, damaged or destroyed property is
transferred to an insurer by operation of law or contract, i.e., the insurance
claim value of property may not be used as a trade-in credit when an insured
purchases tangible personal property to replace property which has been lost or
destroyed.
h) No trade-in credit
may be taken for that portion of the purchase price of a new automobile
representing a settlement which the purchaser has obtained from an automobile
manufacturer pursuant to the New Vehicle Buyer Protection Act [815 ILCS
380].
i) When tangible personal
property is sold that is covered by a "core charge," the full retail selling
price of such property, including the core charge, is subject to Retailers'
Occupation Tax. The fact that a component of the gross receipts from the sale
of the tangible personal property is labeled a "core charge" does not change
the taxable nature of the transaction. A core charge is regarded as a
predetermined trade-in value. Tax should be charged on the core charge, but a
deduction may be taken for the traded-in tangible personal property actually
received after the date of sale if books and records clearly relate the
trade-in to the sales transaction. Such a situation would occur when the
replacement property is purchased prior to the time the used property is
returned. If, on the other hand, the used property is traded in at the time of
purchase, tax is due on the purchase price, less the allowance for the
trade-in.
j) Traded-in first
division motor vehicles during the period beginning January 1, 2020 and until
January 1, 2022.
Beginning January 1, 2020 and until January 1, 2022,
the trade-in credit may not be taken for that portion of the value of, or
credit given for, a traded-in motor vehicle of the first division, as defined
in Section 1-146 of the Illinois Vehicle Code, of like kind and character as
that which is being sold that exceeds $10,000. (Section 1 of the Act)
This means that, during the period beginning January 1, 2020 and until January
1, 2022, $10,000 is the maximum credit a retailer may take on the return to
reduce the taxable selling price of a motor vehicle when he or she accepts the
trade-in of a first division motor vehicle in the transaction, regardless of
the value of, or credit given for, the trade-in. This does not prohibit the
retailer from reducing the price of the vehicle being sold by the value of, or
credit given for, the traded-in motor vehicle. It only limits the credit the
retailer may take on the return for that trade-in.
1) Definitions. For purposes of this
subsection (j):
"Devices requiring a certificate of title under Section
3-101(d) of the Illinois Vehicle Code" means all-terrain vehicles and
off-highway motorcycles purchased on or after January 1, 1998.
[625 ILCS
5/3-101(d) ]
"Motor vehicle" means every vehicle that is
self-propelled and every vehicle that is propelled by electric power obtained
from overhead trolley wires, but not operated upon rails, except for vehicles
moved solely by human power, motorized wheelchairs, low-speed electric
bicycles, and low-speed gas bicycles. Motor vehicles are divided into two
divisions: first division and second division. [625 ILCS
5/1-146 ]
"First division motor vehicle" means a motor vehicle
that is designed for the carrying of not more than 10 persons.
[625 ILCS
5/1-146 ]
"Second division motor vehicle"
means:
a motor vehicle designed for carrying more than 10
persons;
a motor vehicle designed or used for living
quarters;
a motor vehicle designed for pulling or carrying
freight, cargo, or implements of husbandry; and
a motor vehicle of the first division remodeled for
use and used as a motor vehicle of the second division. [625 ILCS
5/1-146 ]
"Vehicle" means every device:
in, upon, or by which any person or property is or
may be transported or drawn upon a highway; or
requiring a certificate of title under Section
3-101(d) of the Illinois Vehicle Code.
However, "vehicle" does not include junk vehicles,
devices otherwise prescribed in the Illinois Vehicle Code, devices moved by
human power, devices used exclusively upon stationary rails or tracks, or
snowmobiles as defined in the Snowmobile Registration and Safety Act
[625 ILCS 40]. [625 ILCS 5/1-217
]
2) Items That Are First
Division Motor Vehicles. Beginning January 1, 2020 and until January 1, 2022,
traded-in first division motor vehicles are subject to the $10,000 limit on the
trade-in credit. First division motor vehicles generally consist of most
standard passenger cars. This includes most sport utility vehicles (SUVs) that
are enclosed and designed primarily for passengers, regardless of whether the
SUV is registered as a passenger vehicle, registered as a Class B vehicle under
Section 3-815 of the Illinois Vehicle Code, or registered in some other way. In
addition, devices requiring a certificate of title, such as all-terrain
vehicles (ATVs) and off-highway motorcycles are first division motor vehicles.
To aid in the determination of whether a traded-in motor vehicle is a first
division motor vehicle, the following is a non-exhaustive list of first
division motor vehicles:
A) Motor vehicles
designed for carrying not more than 10 persons. This category includes motor
vehicles designed as passenger vehicles, but whose seats have been removed,
such as a minivan with the seats removed. This is in contrast to a motor
vehicle that is designed for pulling or carrying property, freight, or cargo,
such as a panel van, which is a second division motor vehicle.
B) SUVs designed for carrying not more than
10 persons.
C) Motorcycles, both
on-road and off-road.
D)
ATVs.
3) Items That Are
Second Division Motor Vehicles. Second division motor vehicles that are traded
in are not subject to the $10,000 limit on the trade-in credit. Second division
motor vehicles generally include open-bed vehicles (such as pickup trucks) and
enclosed vehicles designed to carry cargo (such as panel vans). To aid in the
determination of whether a traded-in motor vehicle is a second division motor
vehicle, the following is a non-exhaustive list of second division motor
vehicles:
A) Motor vehicles designed for
carrying more than 10 persons, including limousines, SUVs, transport vehicles,
and any other passenger vehicle designed for carrying more than 10
passengers.
B) Motor vehicles
designed or used for living quarters, such as RVs (recreational
vehicles).
C) Motor vehicles
designed for pulling or carrying property, freight, or cargo. This category
includes open-bed vehicles, including, but not limited to, pickup trucks (even
if the bed has been covered by a top of any kind) and side by side vehicles,
also known as UTVs (utility vehicles), ROVs (recreational off-highway
vehicles), and MOHUVs (multi-purpose off-highway utility vehicles), if they
have an open bed (even if the bed has been covered by a top of any kind) or are
otherwise designed for carrying property, freight, or cargo. This category also
includes enclosed vehicles typically used commercially, such as panel vans or
cargo vans.
D) School buses,
including vehicles of the first division used and registered as school
buses.
E) Ambulances, medical
carriers, and hearses.
4) Beginning January 1, 2020 and until
January 1, 2022, sales to purchasers from non-reciprocal states are subject to
the $10,000 trade-in credit limit. The $10,000 limit on the credit allowed for
traded-in first division motor vehicles applies regardless of whether the
purchaser is an Illinois resident, unless the purchaser can claim the
non-resident purchaser exemption as a resident of a reciprocal state found
under 35
ILCS 120/2-5(25). Under
35 ILCS
120/2-5 (25-5) residents of states other than Illinois
may not claim the nonresident purchaser exemption on purchases of motor
vehicles or trailers in Illinois that will be titled in a state that does not
give Illinois residents a nonresident purchaser exemption on their purchases in
that state of motor vehicles or trailers that will be titled in Illinois (i.e.,
the other state offers no reciprocal exemption to Illinois residents). These
states are referred to as non-reciprocal states. The $10,000 trade-in credit
limit applies in sales to nonresident purchasers from nonreciprocal states. See
ST-58, Reciprocal - Non-Reciprocal Vehicle Tax Rate Chart, to determine whether
another state is non-reciprocal with Illinois. Note, however, that motor
vehicles leased to nonresidents using drive-away permits or transferring
out-of-state vehicle registration plates will be exempt, regardless of the
purchaser's state of residence. Therefore, the trade-in credit limit does not
impact these transactions.
5)
Examples. The following examples illustrate the $10,000 limit on the trade-in
credit allowed beginning January 1, 2020 and until January 1, 2022.
EXAMPLE 1
A motor vehicle retailer sells a new car for $40,000 and
allows $30,000 for the trade-in of a sport utility vehicle that seats 8
passengers. Since a sport utility vehicle that seats 8 passengers is a first
division motor vehicle, the credit that the retailer may take on the return for
the traded-in sport utility vehicle is $10,000.
EXAMPLE 2
A motor vehicle retailer sells a new car for $40,000 and
allows $30,000 for the trade-in of a pickup truck. Since a pickup truck is a
second division motor vehicle, the credit that the retailer may take on the
return for the traded-in pickup truck is $30,000.
EXAMPLE 3
A motor vehicle retailer sells a new motorcycle for $30,000
and allows $20,000 for the trade-in of a motorcycle. Since a motorcycle is a
first division motor vehicle, the credit that the retailer may take on the
return for the traded-in motorcycle is $10,000.
EXAMPLE 4
A motor vehicle retailer sells a new limousine for $60,000
and allows $30,000 for the trade-in of a limousine that seats 10 passengers.
Since a limousine that seats 10 passengers or less is a first division motor
vehicle, the credit that the retailer may take on the return for the traded-in
limousine is $10,000.
EXAMPLE 5
A motor vehicle retailer sells a new limousine for $60,000
and allows $30,000 for the trade-in of a limousine that seats 11 passengers.
Since a limousine that seats 11 passengers or more is a second division motor
vehicle, the credit that the retailer may take on the return for the traded-in
limousine is $30,000.
